Is the social security crisis not for real?
When it comes to politicians, the best advice is to look at what they do, not what they say. By this standard, President Bush's Social Security Commission agrees with what some of us have been saying all along there is no urgent need to "fix" Social Security.
Of course this is not what they say. When the commission began its work last spring it issued dire proclamations about the impending doom of the program. They tried to convince the public that bankruptcy was just around the corner (perhaps confusing Social Security with Enron). The commission's co-chairs, former Senator Daniel Patrick Moynihan and AOL-Time Warner's new chief executive Richard D. Parsons, warned that the program would be running short of money in 2016, less than 15 years down the road. They said urgent action was needed now, to avert disaster.
The commission's interim report kept to the same themes. It warned that there was nothing to back up the government bonds held by Social Security, implying that the government might default on these bonds. This was not a very credible scenario: the U.S. government has never defaulted on its bonds in our nation's entire history. But the idea was to convince people that the Social Security program could not rely on the interest income from government bonds that it would need in the years after 2016.
Yet in spite of these scare stories, the commission has not produced a plan to "save" Social Security. In fact, the commission could not even agree on a single plan. Apparently they decided against taking the political heat from the benefit cuts that would be needed to support their proposals for privatization. Instead of producing a single plan that would save Social Security, they produced three plans. None of these plans met the criteria that the commission initially laid down for itself: balancing the program's budget over its 75-year planning horizon.
So the commission punted. What does this mean? Compare this outcome to what happened in 1983, when Social Security faced a real crisis when it was borrowing money from the Medicare program in order to pay benefits each month. Back then, President Reagan and the Congress appointed a commission to develop a plan for restoring solvency to Social Security. The 1983 commission, chaired by Alan Greenspan, produced a plan with both tax increases and benefit cuts. In spite of these unpopular provisions, because everyone recognized that the survival of Social Security was at stake, both houses of Congress approved the plan overwhelmingly.
As intended, the Greenspan commission's plan restored the program to solvency. Nearly twenty years later, the program has accumulated a reserve of more than $1 trillion. And this reserve is growing at the rate of almost $200 billion a year.
By contrast, this new commission does not have a plan to present to Congress. This commission could not reach agreement, despite the fact that all of its members were selected because they already subscribed to the Bush Administration's general principles for privatizing Social Security. If this stacked commission cannot even agree on a plan, can anyone believe that Congress is going to agree on a plan? After all, the whole point of appointing a commission is to take some of the heat off of Congress for an unpopular decision.
But this commission passed the buck. This is in striking contrast to the Greenspan Commission, which put forth a workable plan, despite the fact that it was dominated by ambitious politicians. There was a real crisis that had to be dealt with. They knew that they had to come up with a plan to restore Social Security to solvency. That isn't the case today. The financial industry wants to get its hands on Social Security for the huge fees and commissions it could charge. The anti-government ideologues would love to dismantle Social Security, the nation's most popular and successful social program. To advance their cause, they have grossly misled the public about the state of Social Security's financial health.
But there is no crisis today, and everyone on the commission knows it. According to their own numbers, Social Security can pay all promised benefits for the next 37 years. And the shortfall over the whole 75-year planning period is small relative to our national income (less than three-quarters of one percent).
While the commissioners may say something different, its actions confirm the facts: there's no need to deal with Social Security any time soon.